Find Energy Ltd.
TSX : FE

Find Energy Ltd.

May 31, 2005 17:21 ET

Find Energy to Divest of Southeast Saskatchewan Properties, Confirms $50 Million Credit Facility and Announces Normal Course Issuer Bid

CALGARY, ALBERTA--(CCNMatthews - May 31, 2005) - Find Energy Ltd. (TSX:FE) ("Find" or "the Company") is pleased to announce that it has entered into an agreement to sell all of its properties in southeast Saskatchewan effective June 1, 2005. The $28.5 million transaction is expected to close prior to June 30, 2005, subject to standard conditions and obtaining regulatory and other approvals required by law.

The Company has also entered into a revolving operating loan facility of $50 million providing for borrowing at its banker's prime rate of interest. The borrowing base under the credit facility takes into account the sale of southeast Saskatchewan properties.

Find has received approval from the Toronto Stock Exchange ("TSX") to purchase shares in the Company under the conditions of a Normal Course Issuer Bid. The Normal Course Issuer Bid will allow Find to purchase and cancel up to 2,422,346 common shares in the Company through the facilities of the TSX over the next 12 months.

Highlights

- Production from the southeast Saskatchewan properties to be divested currently averages 580 boe per day, or approximately 16 percent of Find's production of 3,700 boe per day.

- The sale generates a value equal to 21 percent of Find's market capitalization, based on the May 31, 2005 closing price of $4.09 per share.

- The sale price of $28.5 million amounts to approximately $49,150 per daily flowing boe, $21.83 per boe of proved producing reserves and $11.40 per boe of proved plus probable reserves.

- The divestiture will reduce the Company's estimated average unit operating cost by $0.70 per boe or 8 percent.

- The divestiture will provide funds to conduct Find's $60 million 2005 capital program. The program includes the planned drilling of 60 (39.9 net) wells and is primarily directed toward the Pembina area of Alberta.

- After the sale, Find will have no bank debt.

- Find has secured a $50 million revolving operating loan facility at its banker's prime rate of interest.

- The Normal Course Issuer Bid allows Find to purchase up to 2,422,346 common shares on the TSX over the next 12 months and cancel them. If all such common shares were purchased Find's issued and outstanding shares would be reduced by 7.2 percent, increasing performance-per-share metrics.

Southeast Saskatchewan Property Divestiture

In September 2004 the Company sold certain smaller properties in Southeast Saskatchewan for $3.0 million, which together with the proposed sale will result in total proceeds from dispositions in this area of $31.5 million.

The Company currently produces 580 boe per day from the properties to be sold, resulting in a price of approximately $49,150 per daily flowing boe.

The properties have estimated proved producing reserves of 1,305,000 boe, resulting in a sales price of $21.83 per boe proved producing. Proved undeveloped and proved non-producing reserves are estimated at 560,000 boe yielding a price of $15.28 per boe proved. Proved plus probable reserves are estimated at 2,501,000 boe, resulting in a sales price of $11.40 per boe proved plus probable.

Thirty-three percent of the proved plus probable reserves, 531,000 boe of proved and 305,000 boe of probable, are attributable to wells yet to be drilled. These reserves require further capital to be brought on-stream and would not provide further net reserve additions.

In addition, the sale is expected to improve Find's average unit operating cost, which was $8.63 per boe in the first three months of 2005. Operating costs on the divested properties averaged more than $10.00 per boe.

Find operates only 47 percent of the southeast Saskatchewan assets and holds an average working interest of 38 percent. The divestiture will ease the Company's administrative burden, allowing more effort to be directed to its growth in natural gas and light oil production in the Pembina area of Alberta, where it operates all its lands and holds an average working interest of approximately 65 percent.

At Pembina Find has drilled 18 (11.7 net) wells, accessing a total of seven productive zones. Twelve (7.7 net) of these wells currently account for approximately 1,250 boe in daily production, consisting of 5.1 mmcf per day of natural gas and 400 bbls per day of oil and natural gas liquids. Find plans to drill 39 (25.9 net) additional wells before the end of 2005 and to construct a 30 mmcf per day gas plant to come on-stream in spring 2006.

Credit Facility

Effective May 27, 2005, Find has entered into an agreement with ATB Financial to increase its borrowing capacity to $50 million. Prior to this, Find operated with a $30 million revolving credit facility.

Find's new credit facility will allow it to borrow on a demand loan basis at its banker's prime rate of interest. The borrowing base under the credit facility takes into account the divestiture of the southeast Saskatchewan properties. Following the sale of the Southeast Saskatchewan properties, Find's loan balance under the credit facility is anticipated to be nil.

The $50 million revolving operating loan facility will provide funds for general corporate purposes including the purchase of land, drilling and completion of wells and pipeline tie-ins and well-site facilities. This includes construction of the planned gas plant at Pembina, or to support the acquisition of additional properties or other entities.

Normal Course Issuer Bid

The TSX has accepted Find's Notice to Make a Normal Course Issuer Bid (the "Normal Course Bid") to purchase from time to time, as it considers advisable, up to 2,422,346 of its 33,608,776 currently issued and outstanding common shares (being no greater than 10 percent of the public float) on the open market through the TSX's facilities. The price that Find will pay for any shares purchased by it will be the prevailing market price of such shares on the TSX at the time of such purchase. Common shares acquired under the Normal Course Bid will be cancelled.

The Normal Course Bid will commence on June 2, 2005 and will terminate on June 1, 2006 or such earlier time as the Normal Course Bid is completed or terminated at the option of Find.

Find believes that the acquisition of its common shares represents an appropriate use of funds. The purchase of common shares will increase the proportionate interest of, and be advantageous to, all remaining shareholders. In addition, the purchases by Find may increase liquidity to Find's shareholders wishing to sell their common shares.

Summary

Find's divestiture of its southeast Saskatchewan properties, together with the new $50 million credit facility, will provide the Company with sufficient funds to complete its $60 million 2005 capital program, as well as financial flexibility to pursue new projects or potential strategic acquisitions. The increased financial strength will also assist Find in the conduct of its Normal Course Bid.

This news release contains information regarding estimated net present values of reserves. It should not be assumed that the estimates of net present value of the reserves represent the fair market value of the reserves.

Investors are further cautioned that the preparation of financial statements in accordance with Canadian generally accepted accounting principles ("GAAP") requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Estimating reserves is also critical to several accounting estimates and requires judgments and decisions based upon available geological, geophysical, engineering and economic data. These estimates may change, having either a negative or positive effect on net earnings as further information becomes available, and as the economic environment changes.

Cash flow from operations and cash flow netbacks are not recognized measures under GAAP. Management believes that in addition to net income, cash flow from operations and cash flow netbacks are useful supplemental measures as they demonstrate Find's ability to generate the cash necessary to repay debt or fund future growth through capital investment. Investors are cautioned, however, that these measures should not be construed as an alternative to net income determined in accordance with GAAP as an indication of Find's performance. Find's method of calculating these measures may differ from other that of companies and, accordingly, they may not be comparable to measures used by other companies. For these purposes, Find defines cash flow from operations as cash provided by operations before changes in non-cash operating working capital and defines cash flow netbacks as revenue less royalties and operating expenses.

Find has adopted the standard of 6 mcf of natural gas being equivalent to 1 barrel of oil when converting natural gas to barrels of oil equivalent (boe). This practice may be misleading, particularly if used in isolation. A 6:1 conversion ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead.

This news release contains certain forward-looking statements, which are based on Find's current internal expectations, estimates, projections, assumptions and beliefs. Some of the forward-looking statements may be identified by words such as "expects", "anticipates", "believes", "projects", "plans" and similar expressions. These statements are not guarantees of future performance and involve a number of risks and uncertainties, many of which are beyond Find's control. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause Find's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them does, what benefits Find will derive from them. The risks and uncertainties associated with the forward-looking statements included in this news release include, among other things, changes in general economic, market and business conditions; changes or fluctuations in production levels, unexpected drilling results, commodity prices, currency exchange rates, capital expenditures, reserves or reserves estimates and debt service requirements; changes to legislation, investment eligibility or investment criteria; Find's ability to comply with current and future environmental or other laws; Find's success at acquisition, exploration and development of reserves; actions by governmental or regulatory authorities including increasing taxes, changes in investment or other regulations; and the occurrence of unexpected events involved in the exploration for, and the operation and development of, oil and gas properties. Many of these risks and uncertainties are described in Find's Revised Annual Information Form and Find's Management's Discussion and Analysis. Readers are also referred to risk factors described in other documents Find files with Canadian securities authorities. Copies of these documents are available without charge from Find. Find disclaims any responsibility to update these forward-looking statements.

Contact Information

  • Find Energy Ltd.
    William T. Davis
    C.E.O.
    (403) 232-4802
    (403) 232-4824 (FAX)
    or
    Find Energy Ltd.
    Jeffrey P. Jongmans
    C.F.O.
    (403) 232-4809
    (403) 232-4824 (FAX)